Buying vs Renting a House in the UK

Thursday, January 11, 2018

Buying a property is one of the biggest financial decisions you will ever make, but is it the right option for you or are you better off renting?

According to recent data, renting a home or property is now cheaper than buying in over half of British cities. The data, released by Zoopla, reveals the number of areas where it is cheaper to rent than buy has increased by 14% since October 2016, when it was cheaper to buy in 60% of British cities. In 50 of Britain’s biggest cities, the average rental cost of a two-bedroom house is about £690. This is almost £50 less per month than a mortgage of the same house, which has an average repayment of £737.

The figures indicate that house prices may have reached their peak, especially in highly regarded and in-demand areas like London and Cambridge. To own a home in the capital costs around £15,216 more per year than renting, while Cambridge sees the country’s biggest disparity with homeowners paying 52% more than tenants. While buying a home is expensive, it offers more freedom as a homeowner. Renting it seems, is cheaper and more convenient but also more restrictive. Here are some of the considerations of each option to help you decide whether to rent or buy.

Top 10 cities where renting is cheaper than buying

Top 10 cities where buying beats renting

Cambridge

Glasgow

London

Coventry

Brighton

Birmingham

Swansea

Bradford

Wigan

Newcastle-upon-Tyne

Aberdeen

Bolton

Reading

Peterborough

Bournemouth

Nottingham

Rotherham

Barnsley

Southampton

Stoke-on-Trent

Should You Rent or Buy a Home?

The answer to this question is based on personal circumstances, both of individuals and the current market conditions. Many real estate and financial experts can make cases both for and against either option, but ultimately the decision lays with the individual. While buying still wins out over renting in the majority of cities because of recent low-interest rates, a possible rise could change this, while lending criteria has become stricter.

Renting vs Buying a House - How to Decide

Whether you should rent or buy boils down to your requirements as well as your financial and personal circumstances. Before making a decision, ask yourself the following questions:

Do I have/can I save up for a deposit?

Both renting and buying require a big deposit. When buying, the deposit goes towards your mortgage and can lower your monthly repayments. When renting, the deposit acts as security, which you will receive back in full upon termination of your lease and provided the property is in the same condition as when you moved in, save for standard wear and tear. When buying, the minimum deposit is usually 5% of the value of the home.

Do I earn enough to qualify for a mortgage?

Regardless of how much you think you can afford, mortgage lenders and rental agents are quite strict in their qualifying process. When it comes to mortgages, you can only qualify for a mortgage loan if your income can support the monthly repayments as well as your day-to-day living expenses.

How long do I plan to stay?

If you only plan to live in a location for a short while or expect your circumstances to change, then renting may be a better option for you, as it can be cheaper and offers more flexibility. However, if you plan to live in an area or on a property indefinitely and your financial situation is on par with the requirements of a mortgage, as well as receiving expert support from a qualified, reputable agent, then buying a house can work out to be a smarter move in the long run. Whether it is smarter to rent or buy comes down to your own personal and financial circumstances, your views on climbing the property ladder and protecting your financial future.

Douglas & Gordan is a leading property services provider in the UK with extensive experience in the London property market. Speak to a Douglas and Gordon expert today.